tax cap

City Council has a choice for this year’s budget: vote to override the state-mandated tax cap or prepare to tighten the belt for significant cuts and make ends meet.

That may sound like an ultimatum, but it’s how this year’s 2023-24 budget is panning out so far, City Manager Rachael Tabelski says. She gave a budget presentation to council during Monday’s conference session at City Hall.

Healthcare, inflation, diesel fuel, employee salary and retirement costs are all on the rise, and the tax cap allows a levy increase of $154,000 when what’s needed is $450,000, Tabelski said.

Councilman Bob Bialkowski faced the elephant in the room and asked what happens if the group votes not to override the tax cap, “we raise property taxes?” Or make cuts, Council President Eugene Jankowski Jr. said.

Yes, more likely it would be the latter, Tabelski said: “That would mean significant cuts,” she said to The Batavian after the meeting.

“The tax cap is an arbitrary formula given by the state. You know, the only thought this year was that we can raise this revenue and continue the level of services that have expanded slightly in the last year or so. We have a full-time parking and recycling officer, a full-time ordinance officer, another firefighter that was contractually obligated through a contract signed before I was here,” she said. “To cover those costs, plus health care's up $457,000, retirement costs are up $300,000 … I would say this is this year's request, that the city would do everything in its power to maintain under the tax cap in the future.”

That means that, hopefully, this won’t be a recurring ask, she said. City Council would have to approve the measure by at least a 60 percent yes vote.

Can department heads dig deeper and reduce their budget requests?
“This is the bare bones budget. We've already gone through that process of every department, and they present to me, obviously, what they'd like to see in the budget, and then we cut that back significantly to get to this point,” she said. “This is to maintain the level of employees we have at fair wages and to make sure we can pay social security and health care for those employees. Those are the main drivers, plus the inflationary prices of gas, electric, diesel, fuel, and supplies and materials. So they've already done their value engineering, as we call it. But again, council has budget work sessions that go right through, line by line, each expense and discuss it. And there certainly could be changes that come from that.”

Council members will be going through the budget during the next several weeks to ask questions, make suggestions, and see where other cuts might be made. The one area where Tabelski does not recommend taking from is the unassigned fund balance. That fund is best used as a savings account for future use.

She shared that the fund has grown a bit from an overdue payment from Seneca Power Partners, which had been in arrears with its taxes.

“I will say that we had a payment from Seneca Power of penalties and interest on the tax payments. So my hope is that will really help our unassigned fund balance when we get to the end of the audit year in August,” she said. “But when I do the budget, I don't know that number. I have no way to project what that number is until we get into the audit after the budget books close.”

Other parts of the budget include an extra $275,000 “to reserve funds to prepare to bond for the police facility,” she said.

“So right now, we're putting money into reserves, like our savings, so that we're able to bond when the time comes with the hopes of not having to raise property taxes, and being able to do it within those reserve funds we're putting away right now,” she said. “Kind of like when your car payment rolls off, and you put it into your savings account, and then you lease or buy a new car. You can then use that money in your savings account to pay that new car payment.”

Despite the ominous term of "override the tax cap," the actual tax rate would remain the same, Tabelski said. That would be $8.94 per $1,000 assessed value. She is proposing to raise the water rate by 30 cents. 

Council members will be discussing the budget this month and into February before a public hearing on Feb. 27.

Top Photo: City Manager Rachael Tabelski gives an overview of the past year and 2023-24 budget during City Council's conference session Monday at City Hall; shown with department heads nearby, who have already submitted their "bare bones" budgets for consideration. Photos by Howard Owens.

Press release:

Today, U.S Senate Majority Leader Charles Schumer and U.S. Senator Kirsten Gillibrand introduced legislation in the new Congress to eliminate the $10,000 cap on the State and Local Tax (SALT) deduction starting in 2021.

The proposal would allow taxpayers to fully deduct their state and local taxes on their federal income returns. In 2017, the deduction was capped at $10,000 and resulted in a tax increase for many middle-class families.

“When it comes to SALT, New York families needed and deserved this money before the coronavirus took hold, the stakes are even higher now because the cap is costing this community tens-of-thousands of dollars they could be using amid the crisis,” Senator Schumer said.

“That is why I am proud to be leading this legislation to restore our full SALT deduction. Double taxing hardworking homeowners is plainly unfair; We need to bring our federal dollars back home to the to cushion the blow this virus—and this harmful SALT cap—has dealt so many homeowners and families locally.

“I am proud to join my colleagues to introduce legislation to repeal the cap on the State and Local Tax deduction, a cynical policy passed by Republicans as a way to repay wealthy donors and lobbyists with big corporate tax cuts,” Senator Gillibrand said.

“The reinstating of the SALT Deduction will ensure that New York families have more money in their pockets, get much-needed tax relief and will once again be treated fairly.”

Schumer and Gillibrand pointed to the following reasons for why the SALT deduction is unfair to New Yorkers:

• New Yorkers already subsidize other states by paying $36-45 billion more in taxes than we receive back from the federal government;
• The repeal of the SALT deduction results in double taxation by imposing federal taxes on the income used to pay state and local taxes;
• The elimination of the deduction drives wealthier people to other states and leaves middle- and lower-income taxpayers holding the bag to pay for school, police and other essential state and local tax burdens.

A breakdown of data from 2017 shows just how critical the full deduction was to New York homeowners. In the 27th Congressional District, for example, 33 percent of taxpayers used the SALT deduction that year, and the average deduction was for $14,096. In Genesee County, a total of 6,840 households claimed the SALT deduction and the average deduction amounted to $10,156. Countywide, 94 percent middle-income taxpayers were beneficiaries of the SALT deduction.

Across Upstate New York, the average SALT deduction was more than $13,000 across more than 1.2 million households.

Under the pre-Trump tax code, taxpayers who itemized deductions on their federal income tax returns could deduct state and local real estate and personal property taxes, as well as either income taxes or general sales taxes.

State and local income and real estate taxes had made up approximately 60 percent of local and state tax deductions, while sales tax and personal property taxes made up the remainder. According to the Tax Policy Center, approximately one-third of tax filers had itemized deductions on their federal income tax returns.